Delhi HC Denies Writ in Bogus ITC Case; Directs Appeal under Section 107

Case Title: VAB Apparel LLP v. Additional Commissioner, Adjudication (DGGSTI), CGST Delhi North & Ors.
Court: Delhi High Court
Petition No.: W.P.(C) 7195/2025 & CM APPL. 32389/2025
Relevant Section: Section 107, CGST Act, 2017
Category of Dispute: Input Tax Credit
Date of Judgment: 28.05.2025
Relevant Sections: Sections 16, 74, 107 of the CGST Act, 2017

🧾 Facts of the Case

[Para 2–3]: The petitioner, VAB Apparel LLP, challenged an adjudication order dated 17.12.2024 and summary orders dated 04.02.2025 and 12.02.2025. It argued that its Delhi unit had not availed ITC in FYs 2017–18 and 2018–19, while the Show Cause Notice pertained to FY 2018–19, yet the demand was raised for FY 2017–18.
[Para 6]: It was asserted that Fortune Graphics Ltd., a fictitious supplier, had passed on ITC fraudulently. The director of Fortune Graphics admitted no goods were supplied, and the e-way bill analysis confirmed the transactions were bogus.
[Para 8]: The petitioner contended that if no ITC was availed at the Delhi unit, it should not suffer the consequences, including pre-deposit obligations.

❓Question(s) in Consideration

[Para 4, 6, 9]:

1. Whether the writ petition is maintainable when alternate appellate remedy under Section 107 of the CGST Act is available?

2. Whether the Delhi unit, having allegedly not availed ITC, is liable for pre-deposit under the appellate mechanism?

3. Can a factual dispute involving ITC fraud and entity-wise segregation be adjudicated under writ jurisdiction?

👁️ Observations of the Court

[Para 7–9]:

• The Court observed the impugned order elaborately described the modus operandi of bogus ITC claims by the petitioner in collusion with Fortune Graphics Ltd., which was found to be non-existent.

• The matter involved deep factual analysis (e.g., tracing ITC through GSTR-2A/3B and supplier authenticity), unsuitable for writ jurisdiction.

• The petitioner was given an opportunity to present their case, and the principles of natural justice were not violated.

• The Court cited its earlier rulings (Impressive Data Services, Mukesh Kumar Garg) where pre-deposit waiver was disallowed in fraudulent ITC cases.

⚖️ Judgment of the Court

[Para 10–13]:

• The writ petition was dismissed on the ground that alternate appellate remedy under Section 107 CGST Act was available and must be availed.

• Petitioner was allowed to file appeal by 15.07.2025 with requisite pre-deposit, and the appellate authority was directed to decide on merits without rejecting it on limitation grounds.

• Challenge to retrospective cancellation dated 15.04.2024 was kept open for separate writ proceedings.

• All observations were made without prejudice to the appeal’s outcome.

🧩 Between Fine Lines

1. Writ jurisdiction cannot be invoked in cases involving disputed ITC facts or fraud.

2. Pre-deposit requirements are not waived even when ITC wasn’t availed at a unit level if the fraud is systemic.

3. Petitioner must follow appellate remedy under Section 107 CGST Act.

4. E-way bill and supplier scrutiny can overrule petitioner’s self-declared returns.

5. Even absence of physical goods movement can nullify claimed ITC.

📚 Summary of Referred Cases